With the Compact with Africa, the G20 countries have introduced a new concept for African economic development that is meant to strengthen self-responsibility and involve private capital. So far, however, only Germany has been active regarding the Compact. We heard what the target groups think of the concept at the G20 Compact with Africa conference in Berlin in late October.

Under their German presidency, the G20 adopted the Compact with Africa Hamburg/Germany in 2017. In late October 2018, Germany’s Federal Chancellor Angela Merkel invited G20 members to a conference in Berlin/Germany to discuss the details of the Compact, praising the concept as “modern development co-operation”. But what do the target groups think of it?

Strengthening trade

As a continent, Africa consists of 53 sovereign states that have developed very differently over the last few decades. According to Hans Peter Lankes of the World Bank, the decline in commodity prices has above all pulled the fragile countries into a downward trend in terms of both politics and the economy. On the other hand, there are prosperous African countries that can boast high growth rates. There, a large number of small and medium-sized businesses already exist that have set up manufacturing processes for processed goods. “Processing depends on trade,” Lankes explains. In contrast to the trend of declining foreign direct investment, the Compact with Africa states have been able to record rising investments.

With the Compact with Africa, the G20 countries have introduced a new concept for African economic development that is meant to strengthen self-responsibility and involve private capital. So far, however, only Germany has been active regarding the Compact. We heard what the target groups think of the concept at the G20 Compact with Africa conference in Berlin in late October.

Under their German presidency, the G20 adopted the Compact with Africa Hamburg/Germany in 2017. In late October 2018, Germany’s Federal Chancellor Angela Merkel invited G20 members to a conference in Berlin/Germany to discuss the details of the Compact, praising the concept as “modern development co-operation”. But what do the target groups think of it?

Strengthening trade

As a continent, Africa consists of 53 sovereign states that have developed very differently over the last few decades. According to Hans Peter Lankes of the World Bank, the decline in commodity prices has above all pulled the fragile countries into a downward trend in terms of both politics and the economy. On the other hand, there are prosperous African countries that can boast high growth rates. There, a large number of small and medium-sized businesses already exist that have set up manufacturing processes for processed goods. “Processing depends on trade,” Lankes explains. In contrast to the trend of declining foreign direct investment, the Compact with Africa states have been able to record rising investments. African trade is becoming more local, and the foreign trade patterns are changing. Past fragmentation of politics, trade and infrastructure is inhibiting development, as the United Nations Conference on Trade and Development (UNCTAD) already demonstrated in detail some years ago.

Growing in peace

Concentrating on a country’s own development is what Ghanaian President Nana Akufo-Addo would like to see more of. In Berlin, he emphasised that Africans had no desire to be objects of charity. Akufo-Addoh maintained that development co-operation ought to be guided by trade and investment. Improving the macro-economy would stimulate the economy as such, provide incentives for investment and thus create vitally needed jobs. Politics had to encourage the private sector in order to make the African companies competitive at national and international level. Akufo-Addo looks forward to a new VW assembly plant; Siemens intend to set up a base for West Africa in Ghana. However, the country’s President is well aware of what this requires. “We want to grow peacefully!” he stressed in Berlin.

Attracting foreign capital

Are the eleven Compact countries privileged? They are also making themselves privileged. Tunisia’s Minister of Finance Mohamed Ridha Chalghoum is aware that the public sector alone is not sufficient to drive development. In order to gain more private capital, this North African country has set itself growth targets. It seeks to reduce government debt and introduce freedom of investment.

Morocco’s Vice Foreign Minister Mohcine Jazouli fully accepts that Africa’s budget deficits represent a problem. Thanks to its geographical location, Morocco suggests itself as a partner of Europe and China and seeks to become a gateway to Southern Africa. Today, special economic zones differ from what they used to be like in the past. Local companies are involved in them.

However, attracting foreign capital also results in restrictions, as Benin’s Development Minister Abdoulaye Bio Tchané noted. His government had limited the time workers were allowed to be on strike to two days. His country was nevertheless seeking more trade agreements with its neighbouring states to further regional integration.

A knock-on effect for neighbouring countries

According to Paul Kagame, Chair of the African Union, the continent is undergoing important changes. Countries are seeking more integration and implementing reforms. They are spending more money on their own development. Kagame refers to free movement of persons and free trade zones as “historic” changes. This was precisely what the Compact with Africa initiative was supporting, and it would support setting examples for neighbouring countries, he stressed in Berlin.

If the countries acted in concert with the G20 states, there would be new prospects, Matamela Cyril Ramaphosa, Deputy Chair of the G20 Africa Advisory Group, maintained. Compared with the previous strategies for industrialisation or the “Energy Access for All” project, the alliance for Africa was providing new impulses and yielding measurable effects. “Africa is open for business!” Ramaphosa announced, and was expecting an inflow of 100 billion US dollars over the coming five years.